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  • FIRST POST
    • Rymo
    • By Rymo 16th Jul 17, 7:44 PM
    • 39Posts
    • 9Thanks
    Rymo
    Monthly Income from 120K - Monthly Income Funds
    • #1
    • 16th Jul 17, 7:44 PM
    Monthly Income from 120K - Monthly Income Funds 16th Jul 17 at 7:44 PM
    Hi,

    I am working part time due to being a carer. I earn appx £200 - £250 per week from self employment, part time, which bars me from receiving carers allowance payments.

    I have a portfolio of monthly income funds (X 8) which I use to provide me a base income.

    I have the following funds

    Artemis Monthly Distribution
    AXA Framlington Monthly Income
    HSBC Monthly Income
    Invesco Perpetual Monthly Income
    Jupiter Monthly Income
    Kames Diversified monthly income
    Premier Multi Asset Monthly Income
    Threadneedle Monthly Extra Income

    The funds cost 120K and are now worth 128K and I have been receiving an income for 15 months which I am happy with.

    The amounts in each fund are about equal.

    88K are held within ISA wrappers and I will move the rest in ASAP.

    I am 52 and have 141K in a DC pension which I don't intend to touch till 60. I intend to pay in £2880 each year to top this up so £3600 with tax relief.

    I also intend to top up the monthly income funds when I can.

    I appreciate markets go up and down and most important for me is that the income continues to be paid. If there was / is long term capital growth it would be a bonus.

    Can anybody see any massive problems with my strategy?

    Rymo.
Page 1
    • bigadaj
    • By bigadaj 16th Jul 17, 10:13 PM
    • 9,340 Posts
    • 5,971 Thanks
    bigadaj
    • #2
    • 16th Jul 17, 10:13 PM
    • #2
    • 16th Jul 17, 10:13 PM
    In general seems ok.

    We're obviously well overdue a market correction, but so long as you don't panic and sell out on a 30-40% loss and wait for recovery then should be ok.

    My main concern would be that most of those look uk focused, and many will be targeting a small number of large companies that pay high dividends, so you probably lack diversification and may suffer if a small part if the economy does badly, like the banks in 2008.

    I'd want soem funds that are global equity income, and there are now plenty of funds that focus on Asia, even some in South America, so would look at swapping into some of these for at least part of the portfolio.
    • Audaxer
    • By Audaxer 16th Jul 17, 10:30 PM
    • 239 Posts
    • 69 Thanks
    Audaxer
    • #3
    • 16th Jul 17, 10:30 PM
    • #3
    • 16th Jul 17, 10:30 PM
    I've also been looking at some of these multi asset income funds and just invested in the Artemis Monthly Distribution fund, and that one is well diversified globally although some of the others may have more UK bias.

    My only concern for the strategy would be if there is a market correction or crash, I'm not sure the funds would be able to continue to pay the same level of income that they currently pay.
    • sorcerer
    • By sorcerer 17th Jul 17, 11:21 AM
    • 777 Posts
    • 349 Thanks
    sorcerer
    • #4
    • 17th Jul 17, 11:21 AM
    • #4
    • 17th Jul 17, 11:21 AM
    Perhaps consider some investment trusts as well, many of which have paid a growing dividend for years. Such as City of London, Murray International and Scottish American.


    Also you don't always have to buy just funds that pay monthly, you could consider quarterly payers, that pay at different quarters.


    But in general I would agree with others too much in the UK big companies, be good to diversify your portfolio.
    • Malthusian
    • By Malthusian 17th Jul 17, 12:31 PM
    • 2,375 Posts
    • 3,289 Thanks
    Malthusian
    • #5
    • 17th Jul 17, 12:31 PM
    • #5
    • 17th Jul 17, 12:31 PM
    Even if you are unconcerned about the capital, the main risk to you is that we have a prolonged recession and UK companies either cut their dividends on a large scale (or even go bust) or fail to grow their dividends in line with inflation. Having so many funds is probably giving you a false impression of how diversified you are. Most of them are probably invested in largely the same kind of companies and when the market falls they will all fall together.

    Some companies pay out their surplus income, others reinvest it within the company, others do a bit of both. The choice to take the "natural" dividend income is therefore rather arbitrary and simply leaves the decision of how much income to take entirely in the hands of the management of the underlying companies.

    The alternative is to decide how much you actually need and then set up a monthly fixed withdrawal. Obviously if your chosen income is higher than the dividends you will be eating into the capital, but on the other hand if it is lower than the dividends, they can be reinvested to build up the capital. The advantage of this is that you are no longer restricted to funds which pay income out on a monthly basis and you are free to spread your investments far more widely.

    There is only a long-term problem if you choose a higher level of income than can be sustained, and to avoid this problem by letting the company and fund managers choose how much income you get is putting the cart before the horse. Classically speaking you should decide how much income you need and based on that decide suitable investments, not let the investments pick how much income you get. Unless you don't trust yourself with that decision.
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